consumersinternational.org Consumers and Financial Services: the road to a Model Law for Familiar Insolvency Antonino Serra Cambaceres Consumers International Empowering Tomorrow’s Consumers CI World Congress 5 May 2011, Hong Kong consumersinternational.org

About Consumers International Global federation of consumer organisations 220 member organisations in 115 countries Independent and not-for-profit Global research and campaigns through and for our members consumersinternational.org

About Santiago Office and LAC region 40 member organisations Main Programmes: Financial Services, Sustainable Consumption, Food, ICT for incidence in policies, CPL. Member of the IberoAmerican Consumer Protection Agencies Forum Liaison with OAS, IDB, Red Puentes, Oxfam consumersinternational.org

Summary The origin of the Model Law: FS project for LAC Key findings Insolvency Law consumersinternational.org

The origin of the Model Law: FS project for LAC A national and regional research project on consumer credits, advertising and contracts In Argentina, Brazil, Chile, Perú and Uruguay Surveyed 5 banks in each country At least one bank was present in each of the countries At least two of them were in 4 of the countries

consumersinternational.org KEY FINDINGS Similiar situations and actions taken by financial institutions in all the countries Lack of public policies related to access to credit, and none related with overindebtedness A weak regulation and enforcement in relation to credits, credit conditions, contracts, consumer protection (advertising, information) The idea that the market can be regulated mainly by “persuasion”

consumersinternational.org Access to credit: problems derived from cost (high interest rates) + granting credits (stricter rules – less flexible conditions) Indebtedness: more agressive offers (advertising) + weak control of legal frameworks (abusive clauses in contracts) Enforcement: irregularity of controls Information: confusing, insufficient, inexistent

consumersinternational.org Advertising: misleading and false ads Education: weak literacy among consumers on financial matters Tools: lack of tools to solve problems (contracts, overindebtedness)

consumersinternational.org Responsible credit: information + education + clear rules and transparency + policy making Needed tools: legislation: insolvency law + banking and credit cards law + “positive” financial records + consumer protection

consumersinternational.org CSR: a common ground for agreement (consumers + banks and financial institutions + regulators + experts + international institutions/organisations) Indicators + a system to compare policies and actions (double standards) Similar facts in Central America and the Andean Community of Nations

consumersinternational.org Recommendations Promote the enactment of an insolvency law Better and thorough regulation Force banks to adapt information and advertising to comply with legislation Make contracts available to consumers Force authorities to control abusive clauses Develop campaigns for financial lteracy Foster dialogue among stakeholders Regulate handling of sensitive data Develop comparative indicators: Monitoring Guide for banks

consumersinternational.org Insolvency Law A framework, a model A “principiological” law To protect individuals and families A personal “Chapter 11” Existent in some countries (France, Germany, Colombia)

consumersinternational.org Insolvency Law Two stages: ADR + Courts A small administrative structure with experts Guarantee a minimum for living A decent life ensured Process of admission Passive Overindebtedness (unemployment, illness, divorce, unexpected causes)

consumersinternational.org Insolvency Law 4 years’ maximum for payment of debts Strong educational + information component ADR Stage Creditors can choose to come to the mediation A single solution for all Majority is required for agreement Agreement, when reached, is binding

consumersinternational.org Insolvency Law Judicial Stage Creditors must come to the Court Judge has to rule the case Wide range of possibilities (reduce interests, capital, fix installments, etc.) Bona fide principle for debtor 2 year’s void period before a new process

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